Adar Poonawalla in talks to buy Micro Housing Finance

Mumbai: Billionaire Adar Poonawalla, chief executive officer (CEO) of the world’s largest vaccine maker Serum Institute of India Ltd, is in talks to acquire Mumbai-based Micro Housing Finance Corp. Ltd (MHFC), as he seeks to enter the financial services space, two people aware of the development said.

“The due diligence of Micro Housing is underway and the deal may be signed at a size of Rs300 crore,” said one of the two persons, both of whom spoke on condition of anonymity because the talks are private.

Poonawalla, 36, whose father Cyrus founded Serum Institute of India in 1966, refused to comment on MHFC or any other specific acquisition.

Mails sent to Rajnish Dhall, managing director at MHFC, did not elicit any response.

Poonawalla confirmed his interest in the financial services business, which he wants to build through acquisitions. He has plans to enter housing finance first and expand to other areas such as consumer lending and vehicle financing. “We plan to build a loan book of Rs8,000-10,000 crore through multiple buyouts and plan to pump in Rs4,000-5,000 crore for the acquisitions,” he said.

“We do not want to begin from scratch and we are looking for firms with good practices and large loan books. However, we are really concerned on the high valuations of the existing NBFCs (non-banking financial companies) in India,” added Poonawalla, whose father ranked number 10 on last year’s Forbes India Rich List with wealth of $8.6 billion.

Internal accruals will fund the acquisitions, he said, but didn’t rule out the possibility of seeking private equity funding at a later stage.

The group could have entered the financial services space about five years ago, he said, but expanding the vaccine business globally delayed the move.

“We have been expanding our vaccine manufacturing business through inorganic growth route and keep investing for acquisitions, causing a delay in entering into the NBFC space in India,” said Poonawalla, who found a place in last year’s Forbes Asia’s annual Heroes of Philanthropy list, which included 40 philanthropists from 13 countries in the Asia-Pacific region.

Serum Institute of India, the world’s largest vaccine maker by number of doses produced and sold, acquired a defunct unit of Czech Republic-based injectable polio doses maker Nanotherapeutics Inc. for €72 million (Rs521 crore) in April.

Poonawalla in 2011 became the CEO of Serum Institute of India with full control of day-to-day operations of the company. In 2012, he played a major role in the acquisition of Bilthoven Biologicals, a Netherlands-based government vaccine manufacturing company.

Serum Institute has invested close to Rs1,500 crore in a new greenfield project in Pune, a flu vaccine manufacturing facility to cater to European and US markets. Serum Institute supplies vaccines including those for diphtheria, tetanus, H1B, BCG, r-Hepatitis B, measles and mumps to 147 countries.

The Poonawallas acquired the iconic Lincoln House in Mumbai for Rs750 crore in 2015. The sale of the property in the Breach Candy area of south Mumbai, which used to house the US Consulate, to the Poonawallas made it one of the largest real estate deals in Mumbai.

MHFC, which focuses on providing housing loans to individuals in the low-income group, had a loan book of Rs317 crore as of 31 March 2017. Incorporated in 2008, MHFC offers loans in the Rs5 lakh range against the security of the house being bought by a borrower.

MHFC has tie-ups with builders in the affordable housing space who will sell flats at a final price of Rs5-6 lakh. The flats will be located in the outskirts of Mumbai, according to the company website.

MHFC’s promoters include 62-year-old executive chairman Madhusudhan Menon, who previously worked with American Express Bank as India head for commercial banking and capital markets.

“There is a lot of interest currently in this sector given growth prospects, especially with the government’s focus on low-income housing. We regularly get approached with proposals for investment or strategic buyout, but neither I nor the company have any comment to make at this stage,” said Screwvala.

“The significant opportunity in the financial services space, especially microfinance, SME and affordable housing finance segments, which are growing up rapidly, is attracting the conventional entrepreneurs to diversify into these segments,” said Rambhushan Kanumuri, head of corporate finance and equity capital markets at advisory firm Investec Capital Services India Private Ltd.

“NBFCs stocks have re-rated sharply post demonetization on account of decline in interest rates which has helped wholesale funded institutions in reducing their cost of funds. Moreover, there is a general belief that credit growth for NBFCs could be beneficiary of formalisation of lending in the country, ” said Kanumuri.